Cost Segregation: How to 10x Year-One Depreciation

Cost segregation studies engineer-classify portions of a property into 5-, 7-, and 15-year asset lives — accelerating depreciation dramatically vs. the default 27.5-year residential schedule.

Combined with bonus depreciation (currently phasing down), a $400K rental can produce $80–120K in year-one paper losses.

Studies cost $2,500–$8,000 and only pencil out on properties worth $250K+. Always model the after-tax cash flow with and without — sometimes the simpler straight-line is enough.